The Unique Canadian Framework for Micro-cap Companies

The Unique Canadian Framework for Micro-cap Companies

The Canadian securities landscape offers a long-standing framework for “venture issuers” (typically micro-cap companies). As U.S. stock exchange listing standards have become more stringent in several respects, it is worth noting how companies can consider initially listing in Canada as a first step under a more accommodating framework.

At some point in the public company life cycle, most consider listing on Nasdaq or NYSE in order to access the large pool of capital in the U.S. and realize other benefits of a U.S. stock exchange listing. Recent changes to Nasdaq’s and NYSE’s listing rules (approved by the SEC in Q1 2025) seem to indicate that U.S. senior exchange listings, and post-listing compliance, are becoming increasingly more challenging for micro-cap companies. The ability of companies to rely on public shareholder distribution from pre-IPO shareholdings or to cure post-listing minimum bid price requirements via reverse stock splits are two instances of the Nasdaq and NYSE requirements becoming more stringent, with support of the SEC. While Canadian stock exchanges of course do not offer the same market as U.S. senior exchanges, the long-standing concept of a “venture issuer” in Canada and the flexibility offered by TSXV and CSE listing requirements continue to support a market that accommodates micro-cap companies.

Many initial listings on Canada’s venture exchanges see a go-public price between $0.10 and $1.00 per share. Post-listing, there is significant flexibility with minimum bid price requirements and companies listed on the TSXV and CSE have the ability to raise capital at prices between $0.01 and $0.05 per share, provided that certain conditions are met. The threat of delisting as a result of not maintaining a prescribed minimum bid price is not something that is commonly faced by Canadian venture issuers, as it is with U.S. listed micro-cap companies. With respect to public distribution, the TSXV and CSE will typically recognize share distribution coming from legacy shareholders (ie. non-IPO shareholders), provided that the shares are held by public shareholders and the shares are not subject to any resale restrictions.

More generally, Canadian securities laws have embedded a long-standing concept of a “venture issuer”. For public venture issuers, who are typically listed on the TSXV or CSE, certain audited financial statement exemptions have historically been available when going public (ie. two years vs. three years) and financial reporting timelines post-listing are longer than those provided for non-venture issuers.¹

The above is a brief reminder of a few of the accommodations offered in Canada to public micro-cap companies. It speaks to the fact that Canadian regulators and stock exchanges offer a framework that provides significant flexibility for smaller companies and there are many other aspects of Canadian exchange listing rules and securities laws worth considering that could accommodate your company’s initial listing plans (perhaps before an up-listing to a senior U.S. exchange).

___

DuMoulin Black LLP is a leading corporate finance and securities law firm based in Vancouver with a long track record of working with companies listed on Canadian stock exchanges. We offer companies decades of experience working with Canadian securities commissions and stock exchanges and we understand both the technical and practical aspects of the listing process that need to be navigated for companies of all stages and in all areas of business.

Reach out to JJ Hudolin, Advisor at DuMoulin Black, to discuss the possibility of listing your company on a Canadian stock exchange.